“We’re having one our best direct summer sales seasons in the history of
the Company with our innovative Smart Home products and services
boosting our per rep sales average above our record setting 2013 year.
Our inside sales team is also having a great year as both lead
generation and conversion ratios are delivering significant year over
year subscriber growth”, said Todd Pedersen, CEO of APX Group. Mr.
Pedersen continued, “Consumer adoption of Smart Home services reached
approximately 80% in Q2, driving Average RMR per New Subscriber to
$62.05 this quarter. Our SkyControl SaaS operating system now has more
than 284,000 users and the team continues to add functionality and
features. We continue to focus on expansion of our high-speed wireless
internet business and opened our third market in the San Antonio area,
adding 4,218 new customers during the quarter.”

APX Group reported total revenue of $157.9 million for the quarter ended
June 30, 2015, a 17.7% increase compared to $134.2 million for the
quarter ended June 30, 2014. Recurring revenue for the quarter increased
16.3% compared to the prior year, driven by a 12.2 % increase in Total
Subscribers and a 36.0% increase in the number of Smart Home Total
Subscribers receiving additional services beyond the Company’s basic
interactive security package. The Company added 89,185 net new Smart
Home subscribers in the second quarter, which included 13,902 from our
inside sales channel for a year over year growth of 23.3%. The Company’s
second quarter recurring revenues also benefited from continued growth
in its wireless Internet services. Activation fees and other service
revenues grew by 56.9% and 48.2% respectively during the quarter as
compared to the prior year. The Company continues to experience revenue
headwinds in the amount of $2.0 million in the second quarter due to
foreign exchange rates related to its Canadian operations.

Year to date revenues for the six month period ended June 30, 2015 were
$310.1 million, a 17.3% increase over the year to date revenues of
$264.4 million for the same period in 2014. Year to date recurring
revenues were up 16.6% compared to the same period of the prior year.

Summary of Key Financial and Portfolio Metrics for the last
five quarters

($ in millions, except for subscriber data)

June 30,2014

September 30,2014

December 31,2014

March 31,2015

June 30,2015

Total Revenue

$

134.2

$

146.9

$

152.4

$

152.2

$

157.9

Adjusted EBITDA

$

68.6

$

78.8

$

84.1

$

89.5

$

93.4

Total RMR(1)

$

45.8

$

49.0

$

48.7

$

48.3

$

52.4

Net New Originations

84,695

73,220

21,545

25,809

89,185

Avg. RMR per New Subscriber(1)

$

62.61

$

62.81

$

60.16

$

61.46

$

62.05

Total Subscribers(1)

851,129

899,174

894,175

890,125

955,162

Avg. RMR per Subscriber(1)

$

53.84

$

54.48

$

54.50

$

54.26

$

54.86

Subscriber Account Attrition(2)

13.7

%

12.8

%

12.5

%

12.5

%

12.0

%

(1) Total Subscribers and RMR data excludes wireless Internet
business and are provided as of each period end

(2) Subscriber attrition is reported on an LTM basis for each period
end and excludes wireless Internet business

“Vivint achieved a record $93.4 million in Adjusted EBITDA in the second
quarter”, said Mark Davies, CFO of APX Group. “Vivint’s Net Service
Margin improved 320 basis points year over year to 73.2% this quarter,
as Net Service Cost per Subscriber dropped to $14.72 from $16.16 in the
year ago quarter. The Company’s account attrition showed marked year
over year improvement demonstrated by a 170 basis point reduction from
13.7% in Q2 2014, to 12.0% in the current quarter. We’re also pleased
with our G&A and fixed costs scaling, as total G&A was down $10 million
year over year and as a percentage of total revenue G&A dropped to 15.9%
vs. 26.3% in Q2 2014.

Costs and Expenses

Operating expenses were $58.6 million for the quarter ended June 30,
2015, compared to $47.2 million for the same period in 2014. Excluding
an inventory adjustment and the wireless internet business, operating
expenses were up 6.0% compared to same quarter last year. The increase
in operating expenses were attributable to the growth in our subscriber
base, including personnel costs of monitoring and customer support
services, non-capitalized inventory and equipment costs, partially
offset by a reduction in subcontracted monitoring expense.

Selling expenses, net of capitalized subscriber acquisition costs, were
$31.2 million for the second quarter 2015 compared to $28.7 million for
the second quarter 2014. The year over year increase was primarily
attributable to higher digital marketing and lead generation costs
associated with our inside sales channel and increased personnel costs
to support the growth of the business. Vivint’s LTM Net Creation Cost
Multiple as of June 30, 2015 was 31.1x, excluding its wireless Internet
service, a sequential drop of 0.3x for the LTM period ended March 31,
2015.

General and administrative (“G&A”) expenses were $12.9 million for the
quarter ended June 30, 2015, including a $12.2 million credit related to
a one-time non-cash gain on settlement of merger-related escrow,
compared to $35.3 million for the same period in 2014. Other significant
drivers of the year-over-year decrease in G&A were an elimination of
branding and marketing costs, reduction in employee related costs and a
decrease in bad debt expense resulting from a reduction in the Company’s
accounts receivable balance.

The Company’s net loss for the quarter ended June 30, 2015 was $43.6
million compared to a net loss of $66.3 million for the same period in
2014. Adjusted EBITDA1 for the Company was $93.4
million for the second quarter ended June 30, 2015, up 36.2% as compared
to $68.6 million for the second quarter in 2014. The second quarter 2015
Adjusted EBITDA excludes the $12.2 million non-cash gain on settlement
of merger-related escrow.

Net loss for the first six months of 2015 was $91.7 million compared to
a net loss of $113.6 million for the same period in 2014. Adjusted
EBITDA for the first six months of 2015 was $183.0 million, up 24.9%
compared to $146.5 million for the first six months of 2014.

Liquidity

As of June 30, 2015, the Company’s liquidity position on a consolidated
basis, defined as cash on hand, marketable securities and available
borrowing capacity under the Company’s revolving credit facility, was
approximately $145 million.

Certain Credit Statistics

Our net leverage ratio, defined as the ratio of net debt to LTM Adjusted
EBITDA, was 5.8x at June 30, 2015.

Restatement and Reclassification of Cash Flows

On August 3, 2015, management and the Audit Committee of the Board of
Directors concluded that the consolidated financial statements included
in the Company’s Annual Report on Form 10-K for the year ended December
31, 2014, and the Company’s unaudited interim condensed consolidated
financial statements included in the Company’s Quarterly Reports on Form
10-Q for the quarterly periods ended March 31, 2015, September 30, 2014,
June 30, 2014 and March 31, 2014, contained errors in the classification
of subscriber acquisition costs on its consolidated statements of cash
flows. The Company determined that cash payments related to subscriber
acquisition costs were improperly classified as an investing activity
rather than an operating activity. These errors do not have any impact
on the Company’s previously reported consolidated balance sheets or its
statements of operations, or its previously reported total cash flows or
Adjusted EBITDA. As a result, the Company has filed an amendment to its
Annual Report on Form 10-K for the year ended December 31, 2014,
restating the historical consolidated financial statements to reclassify
the subscriber acquisition costs from cash flows used in investing
activities to cash flows used in operating activities on the
consolidated statements of cash flows for such periods. The Company also
expects either to file amendments to previously filed quarterly reports
or restate the prior-year interim periods in future quarterly reports to
reflect this reclassification in its consolidated statements of cash
flows in the applicable interim periods described above.

Conference Call

Vivint will host a conference call and webcast to discuss the quarterly
results at 10:00 a.m. EDT August 11, 2015. To access the conference
call, please dial (877) 201-0168 from the United States and Canada or
(647) 788-4901 from outside the United States and Canada and use the
conference ID 5530413. A financial results presentation and online
access to join the webcast will be made available immediately prior to
the call on the Investor Relations section of the Company’s website at www.investors.vivint.com/events-presentations/events-calendar.

A replay of the webcast will be made available on the Investor Relations
section of the Company’s website at www.investors.vivint.com
following the call.

About Vivint

As a leading smart home technology provider, Vivint offers home
security, energy management, home automation, local cloud storage, and
high-speed Internet solutions to more than 970,000 customers throughout
the United States, Canada and New Zealand. The end-result is a smart
home solution that saves you time and money and ultimately simplifies
your life. For more information, visit the Company’s website at www.vivint.com.

Forward-Looking Statements

This earnings release and accompanying conference call include certain
forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995, including statements regarding, among
other things, our plans, strategies and prospects, both business and
financial. Forward-looking statements convey the Company’s current
expectations or forecasts of future events. All statements contained in
this earnings release other than statements of historical fact are
forward-looking statements. These statements are based on the beliefs
and assumptions of our management. Although we believe that our plans,
intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we
will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
uncertainties and assumptions. These statements may be preceded by,
followed by or include the words “believes,” “estimates,” “expects,”
“projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,”
“scheduled,” “anticipates” or “intends” or similar expressions.

Forward-looking statements are not guarantees of performance. You should
not put undue reliance on these statements which speak only as of this
date hereof. You should understand that the following important factors,
in addition to those discussed in “Risk Factors” in Amendment No. 1 on
Form 10K/A to the Company’s annual report on Form 10-K for the year
ended December 31, 2014 (the “10-K”), and other reports filed with the
Securities Exchange Commission (“SEC”), as such factors may be updated
from time to time in our periodic filings with the SEC, which are
available on the SEC’s website at www.sec.gov, could affect our future
results and could cause those results or other outcomes to differ
materially from those expressed or implied in our forward-looking
statements:

risks of the security and home automation industry, including risks of
and publicity surrounding the sales, subscriber origination and
retention process;

the highly competitive nature of the security and home automation
industry and product introductions and promotional activity by our
competitors;

increases and/or decreases in utility and other energy costs,
increased costs related to utility or governmental requirements; and

cost increases or shortages in security and home automation technology
products or components.

In addition, the origination and retention of new subscribers will
depend on various factors, including, but not limited to, market
availability, subscriber interest, the availability of suitable
components, the negotiation of acceptable contract terms with
subscribers, local permitting, licensing and regulatory compliance, and
our ability to manage anticipated expansion and to hire, train and
retain personnel, the financial viability of subscribers and general
economic conditions.

These and other factors that could cause actual results to differ from
those implied by the forward-looking statements in this press release
are more fully described in the “Risk Factors” section of our annual
report on Form 10-K for the year ended December 31, 2014 and other
reports as such factors may be updated from time to time in our periodic
filings with the SEC. These risk factors should not be construed as
exhaustive. We disclaim any obligations to and do not intend to update
the above list or to announce publicly the results of any revisions to
any of the forward-looking statements to reflect future events or
developments. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety
by the foregoing cautionary statements. We undertake no obligations to
update or revise publicly any forward-looking statements, whether a
result of new information, future events, or otherwise.

Certain Definitions

The following definitions are used in this press release for purposes of
describing the results in our home security and automation business and
except where noted, exclude our wireless internet business.

“Total Subscribers” means the aggregate number of active security and
home automation subscribers at the end of a given period.

“RMR” means the recurring monthly revenue billed to a security and home
automations subscriber.

“Total RMR” means the aggregate RMR billed to all security and home
automation subscribers.

“Average RMR per Subscriber” means the Total RMR divided by Total
Subscribers. This is also commonly referred to as Average Revenue per
User, or “ARPU.”

“Average RMR per New Subscriber” means the aggregate RMR for new
subscribers originated during a period divided by the number of new
subscribers originated during such period.

“Attrition" means the aggregate number of canceled security and home
automation subscribers during a period divided by the monthly weighted
average number of total security and home automation subscribers for
such period. Subscribers are considered canceled when they terminate in
accordance with the terms of their contract, are terminated by the
Company, or if payment from such subscribers is deemed uncollectible
(120 days past due). Sales of contracts to third parties and certain
moves are excluded from the attrition calculation.

“Net Subscriber Acquisition Costs” means direct and indirect costs to
create a new security and home automation subscriber. These include
commissions, equipment, installation, marketing and other allocations
(G&A and overhead), less activation fees and up sell revenue. These
costs also exclude residuals and long-term equity expenses associated
with the direct-to-home sales channel.

“Net Creation Cost Multiple” means total Net Subscriber Acquisition
Costs, divided by the number of new subscribers originated, and then
divided by the Average RMR per New Subscriber.

“Net Service Cost per Subscriber” means total service costs, including
monitoring, customer service, field service and other allocations (G&A
and overhead) costs, less total service revenue divided by total service
subscribers.

“Net Service Margin” means Average RMR per Subscriber less Net Service
Costs divided by Average RMR per Subscriber.

APX GROUP HOLDINGS, INC. and SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Revenues:

Recurring revenue

$

149,543

$

128,602

$

295,207

$

253,156

Service and other sales revenue

6,992

4,719

12,216

9,553

Activation fees

1,378

878

2,685

1,644

Total revenues

157,913

134,199

310,108

264,353

Costs and expenses:

Operating expenses

58,623

47,216

109,952

88,533

Selling expenses

31,244

28,739

56,520

54,318

General and administrative expenses

12,864

35,326

41,098

60,461

Depreciation and amortization

60,070

53,364

117,127

103,716

Total costs and expenses

162,801

164,645

324,697

307,028

Loss from operations

(4,888

)

(30,446

)

(14,589

)

(42,675

)

Other expenses (income):

Interest expense

38,841

35,712

77,101

71,352

Interest income

-

(572

)

(2

)

(1,124

)

Other (income) expenses, net

(294

)

(52

)

(335

)

(297

)

Total other expenses

38,547

35,088

76,764

69,931

Loss before income taxes

(43,435

)

(65,534

)

(91,353

)

(112,606

)

Income tax expense (benefit)

179

737

308

945

Net loss

$

(43,614

)

$

(66,271

)

$

(91,661

)

$

(113,551

)

APX GROUP HOLDINGS, INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

June 30,

December 31,

2015

2014

ASSETS

(unaudited)

(audited)

Current Assets:

Cash and cash equivalents

$

19,953

$

10,807

Restricted cash and cash equivalents

14,214

14,214

Accounts receivable, net

7,547

8,739

Inventories

66,321

36,157

Prepaid expenses and other current assets

16,092

15,454

Total current assets

124,127

85,371

Property and equipment, net

73,684

62,790

Subscriber acquisition costs, net

687,067

548,073

Deferred financing costs, net

51,146

52,158

Intangible assets, net

632,691

703,226

Goodwill

839,644

841,522

Long-term investments and other assets, net

10,915

10,533

Total assets

$

2,419,274

$

2,303,673

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

78,400

$

31,324

Accrued payroll and commissions

74,069

37,979

Accrued expenses and other current liabilities

24,230

28,862

Deferred revenue

34,986

33,226

Current portion of capital lease obligations

5,638

5,549

Total current liabilities

217,323

136,940

Notes payable, net

1,862,619

1,863,155

Revolving line of credit

159,000

20,000

Capital lease obligations, net of current portion

9,286

10,655

Deferred revenue, net of current portion

39,282

32,504

Other long-term obligations

9,307

6,906

Deferred income tax liabilities

8,445

9,027

Total liabilities

2,305,262

2,079,187

Total stockholders’ equity

114,012

224,486

Total liabilities and stockholders’ equity

$

2,419,274

$

2,303,673

APX GROUP HOLDINGS, INC. and SUBSIDIARIES

Summary Cash Flow Data

(In thousands)

(Unaudited)

Six Months Ended June 30,

2015

2014

(Restated)

Net cash used in operating activities

$

(89,690

)

$

(136,386

)

Net cash used in investing activities

(31,307

)

(87,648

)

Net cash provided by (used in) financing activities

130,720

(1,368

)

Effect of exchange rate changes on cash

(577

)

458

Net increase (decrease) in cash

9,146

(224,944

)

Cash:

Beginning of period

10,807

261,905

End of period

$

19,953

$

36,961

Statement Regarding Non-GAAP Financial Measures

Non-GAAP Financial Measures

This earnings release includes Adjusted EBITDA, which is a supplemental
measure that is not required by, or presented in accordance with,
accounting principles generally accepted in the United States (“GAAP”).
Adjusted EBITDA, is a supplemental measure that is not required by, or
presented in accordance with, accounting principles generally accepted
in the United States. It is not a measurement of our financial
performance under GAAP and should not be considered as an alternative to
net income or any other measure derived in accordance with GAAP or as an
alternative to cash flows from operating activities as a measure of our
liquidity. We define “Adjusted EBITDA” as net income (loss) before
interest expense (net of interest income), income and franchise taxes
and depreciation and amortization (including amortization of capitalized
subscriber acquisition costs), further adjusted to exclude the effects
of certain contract sales to third parties, non-capitalized subscriber
acquisition costs, stock based compensation, the historical results of
our Solar variable interest entity and certain unusual, non-cash,
non-recurring and other items permitted in certain covenant calculations
under the indenture governing our existing senior secured notes, the
indenture governing our existing senior unsecured notes and the credit
agreement governing our revolving credit facility. We caution investors
that amounts presented in accordance with our definition of Adjusted
EBITDA may not be comparable to similar measures disclosed by other
issuers, because not all issuers and analysts calculate Adjusted EBITDA
in the same manner. We believe that Adjusted EBITDA provides useful
information about flexibility under our covenants to investors, lenders,
financial analysts and rating agencies since these groups have
historically used EBITDA-related measures in our industry, along with
other measures, to estimate the value of a company, to make informed
investment decisions, and to evaluate a company’s ability to meet its
debt service requirements. Adjusted EBITDA eliminates the effect of
non-cash depreciation of tangible assets and amortization of intangible
assets, much of which results from acquisitions accounted for under the
purchase method of accounting. Adjusted EBITDA also eliminates the
effects of interest rates and changes in capitalization which management
believes may not necessarily be indicative of a company’s underlying
operating performance. Adjusted EBITDA is also used by us to measure
covenant compliance under the indenture governing our existing senior
secured notes, the indenture governing our existing senior unsecured
notes and the credit agreement governing our revolving credit facility.

See the following table for a quantitative reconciliation of Adjusted
EBITDA to Net Loss, which we believe is the most comparable financial
measure calculated in accordance with GAAP.

APX GROUP HOLDINGS, INC. and SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(In millions)

(Unaudited)

Three Months Ended

June 30,

September 30,

December 31,

March 31,

June 30,

2014

2014

2014

2015

2015

Net loss

$

(66.3

)

$

(59.5

)

$

(65.6

)

$

(48.0

)

$

(43.6

)

Interest expense, net

35.1

37.8

38.0

38.2

38.8

Other (income) expense, net

( 0.1

)

0.5

( 2.0

)

-

( 0.3

)

Income tax expense

0.7

( 1.3

)

0.8

0.1

0.2

Depreciation and amortization (i)

40.4

40.8

41.4

37.7

38.3

Amortization of capitalized creation costs

12.9

17.1

18.4

19.4

21.8

Non-capitalized subscriber acquisition costs (ii)

33.9

35.9

38.3

34.9

43.7

Non-cash compensation (iii)

0.5

0.5

0.5

0.7

0.6

Other Adjustments (iv)

11.5

6.9

14.3

6.6

( 6.1

)

Adjusted EBITDA

$

68.6

$

78.8

$

84.1

$

89.5

$

93.4

(i)

Excludes loan amortization costs that are included in interest
expense.

(ii)

Reflects subscriber acquisition costs that are expensed as incurred
because they are not directly related to the acquisition of specific
subscribers. Certain other industry participants purchase
subscribers through subscriber contract purchases and, as a result,
may capitalize the full cost to purchase these subscriber contracts,
as compared to our organic generation of new subscribers, which
requires us to expense a portion of our subscriber acquisition costs
under GAAP.

Other Adjustments includes certain items such as product development
costs, non-operating legal fees, other R&D, deferred revenue fair
value adjustment, subcontracted monitoring fee savings, non-cash
gain on settlement of merger-related escrow and other similar
adjustments.

1 This earning release includes Adjusted EBITDA, a metric
that is not calculated in accordance with Generally Accepted Accounting
Principles in the U.S. (“GAAP”). See the “Statement Regarding Non-GAAP
Financial Measures” section at the end of this earnings release for the
definition of Adjusted EBITDA and a reconciliation to its most directly
comparable financial measure calculated in accordance with GAAP.

Contacts

APX Group Holdings, Inc.Dale R. Gerard, 801-705-8011Senior
Vice President of Finance and Treasurerdgerard@vivint.com

Contacts

APX Group Holdings, Inc.Dale R. Gerard, 801-705-8011Senior
Vice President of Finance and Treasurerdgerard@vivint.com